WHILE their colleagues were out campaigning to keep their jobs, several Senators on the Senate Standing Committees on Rural and Regional Affairs and Transport have been busy saving the country from evil foreigners and their filthy money.
The object of their attention was the proposed takeover of GrainCorp by US company Archer Daniels Midland (ADM). Chief inquisitors were Senators Heffernan and Nash, Liberal and National Party respectively*.
On August 30 the committee issued an interim report in which it recommended that the Australian Competition and Consumer Commission (ACCC) revisit its decision to approve the takeover. It also advised the Foreign Investment Review Board (FIRB) to heed its warnings.
The board of GrainCorp has indicated it will advise shareholders to accept the offer. The FIRB is yet to make its recommendations.
You might think that anyone who respects private property (which allegedly includes the Liberal and National parties) would leave it to the company’s owners, the shareholders, to decide. But not, it seems, if it involves Australian shareholders selling their property to a foreign buyer.
The committee bases its recommendations on a series of assumptions about what might happen if the takeover proceeds. Chief among its concern is that it will lead to further consolidation in the grain handling sector and a lessening of competition.
The committee claims it is significant that ADM owns 16 per cent of Wilmar and that Wilmar is the largest shareholder (at 10pc, plus an indirect interest in a further 10pc) in Goodman Fielder.
It is similarly concerned that ADM owns 80pc of grain trader Toepfer International, that Goodman Fielder makes Coles' home brand bread, that Coles and Woolies have 82pc of the pre-packaged bread market in Australia, and that Goodman buys all its bulk flour from Allied Mills which is supplied and 60pc owned by GrainCorp (the other 40pc is owned by Cargill, another 'evil' foreign company).
It regards ADM's investment in Wilmar, and Wilmar's holding in Goodman, as highly relevant to the consideration of the impact on competition represented by ADM's bid. It also believes it is very likely Cargill will acquire ADM's interest in Allied Mills and that Toepfer will be taken out of the market in Australia.
You need a conspiracy mentality to follow the logic here (if indeed it qualifies as logic).
Coles and Woolworths sell a lot of the bread consumed by Australians. Goodman Fielder bakes the bread for Coles. ADM has a non-controlling share in Wilmar, which has a non-controlling share in Goodman Fielder.
Roughly interpreted, it means because GrainCorp supplies Goodman Fielder with grain and Goodman Fielder supplies Coles with bread, therefore ADM’s takeover of GrainCorp will enable it to dominate the grains market in Australia. And because about 17 years ago ADM was convicted of price collusion in the US, it is especially likely to be up to no good now.
Not much of this bears any relationship to reality.
Indeed, rather than expose the ACCC’s lack of experience in the grain industry, as it claims, the committee’s report suggests it lives in a parallel universe in which you need to be bonkers to exist.
At worst, a takeover of GrainCorp by ADM would change nothing apart from replace Australian investors with American investors. GrainCorp is already a dominant player in grain handling on the east coast and changing the nationality of the owners will not affect that.
Even if ADM were to rationalise facilities to reduce costs, or run the business so effectively that some competitors were forced out, there is no problem The ACCC has imposed an access agreement on GrainCorp that ensures competitors always have access to its facilities. And buying out competitors would require ACCC approval.
At best the takeover will result in a major capital injection into grain handling and storage, helping grain growers to get their crop into storage and transported to ports quicker and at lower cost.
And on that there is no need to take my word for it. Australia’s largest wheat producer, Ron Greentree, told the committee that GrainCorp’s investment in its logistics facilities had not kept up with market needs for 20 or 30 years, leading to degraded facilities and long queues at silos. Unless that changed, he said, growers would face rising costs, undermining their competitiveness.
Mr Greentree suggested that ADM was more likely than GrainCorp to spend the money on the infrastructure that affects farmers, due to its large capital base and more diverse sources of income. If the takeover was blocked, he said, this could have a devastating impact on GrainCorp's value and weaken its already limited capacity to fund capital investment.
The committee thought it knew better than Mr Greentree. In my view that makes it a serious threat to Australia’s agriculture future.
Foreign investment is just as crucial now as it has been in the past, and telling foreigners they are not welcome based on conspiracy theory assumptions is the quickest way I can think of to send the industry into an uncompetitive downward spiral.
*NB: When originally published on Monday, this opinion article claimed Senators Nash and Heffernan are "well known for their aversion to foreigners and their money".
Senator Heffernan contacted Fairfax Agricultural Media to clarify his stance.
He completely rejects suggestions that either he or the Senate Standing Committee on Rural and Regional Affairs and Transport are opposed to foreign investment or have any aversion to foreigners or their money.
"We welcome foreign investment in agriculture. It has been part of Australia's history," he said.
"It is, however critical that overseas investment and overseas-owned businesses operating in Australia be on a level playing field with local industry.
"We need to guard against foreign investment disturbing the capital market base or controlling the local agricultural commodity sector's competitive environment."
David Leyonhjelm has been an agribusiness consultant for 25 years and was elected to the Senate for the Liberal Democrats on the weekend.
He may be contacted at firstname.lastname@example.org